NZ dollar drops after RBNZ’s Wheeler talks intervention

May 7
(BusinessDesk) - The New Zealand dollar fell after Reserve
Bank governor Graeme Wheeler said he may intervene in
currency markets if the kiwi stays strong in the face of
falling dairy prices.

The local currency dropped to 86.89
US cents from 87.41 cents immediate before the speech, 87.47
cents at 8am and 86.91 cents yesterday. The trade-weighted
index fell to 80.43 from a post-float high 81.21 in Northern
Hemisphere trading and 80.72 yesterday.

RBNZ’s Wheeler
told a dairy conference in Hamilton the currency was still
overvalued, and “it would become more opportune for the
Reserve Bank to intervene in the currency market to sell New
Zealand dollars” if the kiwi remains high while commodity
prices fall. The speech came after dairy prices at Fonterra
Cooperative Group’s GlobalDairyTrade auction fell for a
sixth time, fuelling speculation the world’s biggest dairy
exporter will reduce its forecast payout to farmers.

“We suspect it was a reminder from the RBNZ that there
are currency concerns in the economy and that they do have
options,” said Sam Tuck, senior FX strategist at ANZ Bank
New Zealand in Auckland. “It should take the edge off it
(the kiwi dollar’s strength) a little bit – you’ve got
to respect the central bank.”

The local currency rose
against a weak US dollar in New York trading yesterday,
touching a three-year high against the greenback.

Federal
Reserve chair Janet Yellen is giving testimony to the Joint
Economic Committee at Congress on Wednesday in Washington,
and investors will be looking for insights into her thinking
about the strength of recent US data.

Traders largely
ignored New Zealand’s employment figures, which showed
stronger than expected quarterly jobs growth of 0.9 percent
and a record participation rate, which kept the unemployment
rate unchanged at 6 percent.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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